About cost modeling

Cost modeling consists of two components, contract negotiation and contract forecasting. Each of the components is based on an item and its actual or projected usage. Each component is typically driven from the spend analysis process.

For contract negotiation, you can choose one or two contracts related to an item, for example for contracts that have tiers or rebates (although that is not required). You can perform "what if" scenarios to see what effect changes in base cost, tier and rebate values, and quantities purchased would have on the contracts. You can enter a range of quantities or split quantities differently between two contracts.

For contract forecasting, use quantities from past periods to forecast quantity usage for future periods and spend amounts for future periods for contracts for an item based on contract unit costs. You can also manually enter projected quantities for a future period to see how it would affect spend for the contracts you are comparing. You can also adjust period usage by a percent.